2018 (7) TMI 1530 - AT - Service Tax

Valuation - Commercial or Industrial Construction Services - inclusion of value of free supply of material in assessable value - N/N. 01/2006 dated 01.03.2006 - Held that - The issue of inclusion of cost of free supply of goods in the gross value is decided by Apex Court in the case of Bhayana Builders Pvt. Ltd., 2018 (2) TMI 1325 - SUPREME COURT OF INDIA holding that cost of free supply of the goods should not be included for discharging the tax liability. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Interpretation of Notification No. 01/2006 dated 01.03.2006 regarding service tax on Commercial or Industrial Construction Services
- Inclusion of the value of free supply of material in the gross value charged for services rendered
- Extending the benefit of Notification No. 01/2006 to exclude the value of free supplied material for calculating taxable service
- Adjudication of penalties and demands raised by the Revenue

Analysis:
1. The appeal involved a dispute regarding the interpretation of Notification No. 01/2006 dated 01.03.2006 concerning the service tax on Commercial or Industrial Construction Services. The Revenue contended that the value of free supply of material should be included in the gross value charged for services rendered.

2. The lower authorities issued a show cause notice to the appellant, alleging non-inclusion of the value of free supplied material in the gross value charged for services, leading to demands for service tax. The Adjudicating Authority confirmed the demands, penalties, and interest. The First Appellate Authority, relying on precedents, held that the value of free supplied material should not be included for calculating taxable service and extended the benefit of Notification No. 01/2006.

3. The Revenue, represented by the Departmental Representative, argued that the value of taxable service for service tax calculation should include the value of free supply of material by the service recipient, as per the explanation in Notification No. 01/2006. The Revenue contended that the First Appellate Authority erred in extending the benefit of the notification without considering the inclusion of free supply of materials.

4. The Tribunal, after careful consideration, found that the issue of including the cost of free supply of goods in the gross value was previously decided in favor of excluding it by a Larger Bench in the case of Bhayana Builders Pvt. Ltd. The Tribunal highlighted the Apex Court's ruling upholding the Tribunal's reasoning, emphasizing that the value of goods/material provided free of charge by the service recipient should not be included in determining the gross amount charged for taxable services.

5. The Tribunal rejected the Revenue's appeal, affirming the correctness and legality of the impugned order. The judgment clarified that the value of goods/material supplied free of cost by the service recipient should not be included in calculating the value of taxable services provided by the service provider, as established by the Tribunal's and Apex Court's decisions.

By analyzing the issues and the Tribunal's detailed judgment, it is evident that the dispute revolved around the correct interpretation of Notification No. 01/2006 and whether the value of free supplied material should be included in the gross value charged for services rendered. The Tribunal's decision, based on legal precedents and the Apex Court's ruling, clarified that the value of free supply of goods/material by the service recipient should not be considered for determining the taxable service value.